Reference no: EM132670313
Question - Prepare financial reports for corporate entities
Scenario: TAFE Ltd. has provided you with its unadjusted trial balance for the year ended 30 June from which you are required to:(Calculations for all adjustments should be shown)
Adjustments to be made to Profit and Loss
Investment assets are to be impaired by 50% of their carrying amount.
Goodwill was brought to account during the year as a result of a business combination resulting in the acquisition of the Franchise. The business combination has been valued at $225,000 with the recoverable amount of the Franchise valued at $190,000.
Taxation information:
Company tax rate is 30%.
The loss on sale of assets are to be treated as a permanent difference for taxation purposes as are impairments in investment assets and goodwill
Temporary differences were identified in the following asset and liability amounts.
Carrying Amount Tax Base
Trade debtors $24,000 $25,000
Allowance for doubt. debts ($1,000) $0
Plant & machinery $60,000 $60,000
Accumulated depreciation - plant & machinery ($12,000) $18,000)
Employee benefits payable $18,000 $0
Adjustments to be made to Retained Profits.
Provide for a final dividend of $0.06 per share payable in the following year.
Reduce the Dividend Reserve by $15,000
Create - a General Reserve of $10,000
TAFE Ltd. Trial Balance at 30 June Before Adjustments After Adjustments
Details Debit $ Credit$ Debit $ Credit
Accrued interest on deposits 5,000
Plant & machinery 60,000
Accu. depreciation-plant & machinery 12,000
Investments (purchased for longterm gain) 40,000
Accumulated impairment - investments 10,000
Trade debtors 25,000
Allowance for doubt. debts 1,000
Cash in hand 1,000
Stock (30 June) 63,000
Deposits at call 17,500
Franchise 200,000
Goodwill 50,000
Buildings (director's valuation) 400,000
Land (at cost) 600,000
Prepaid interest expense 15,500
Trade creditors 34,500
Debenture loan (due in 5 years) 150,000
Mortgage 75,000
Employee benefits payable 18,000
Cash at bank 67,500
Income tax payable 12,500
Ordinary shares ($1 each) 605,500
Dividend reserve 100,000
Asset revaluation reserve 100,000
Service income 400,000
Credit Sales 600,000
Cost of goods sold 450,00
Advertising 10,000
Auditors fees 20,000
Depreciation expense-Plant&Machine 12,000
Directors fees 12,000
Doubtful debts 1,000
Employee benefits 18,000
Insurances 13,000
Interest on loans 25,000
Interest on deposits 2,000
Lease payments 9,000
Loss on sale of assets 41,000
Repairs 8,000
Wages 48,000
Income tax expense 50,000
Retained profits 1 July 41,000
Interim dividend 35,000 0
2,229,000 2,229,000
Required -
(a) How to Prepare the profit and loss account for the year showing adjustments.
(b) How to Prepare the retained profits account showing adjustments.
(c) How to Prepare Trial Balance at 30 June (after adjustments.).